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Facts
The assessee, a Singapore-based company, filed its return for AY 2015-16 claiming exemption on capital gains. The AO reopened the assessment under Section 147 r.w.s 144C(13), alleging a bogus transaction, and made an addition under Section 68. The notice under Section 148 was issued on 28.07.2022.
Held
The Tribunal held that the notice issued under Section 148 for AY 2015-16 dated 28.07.2022 was barred by limitation as the six-year period from the end of the AY expired on 31.03.2022. Consequently, the reassessment proceedings were quashed.
Key Issues
Whether the reassessment proceedings initiated by issuing a notice under Section 148 on 28.07.2022 for Assessment Year 2015-16 were barred by limitation.
Sections Cited
147, 144C(13), 148, 143(3), 90, 13(4), 148A, 148A(d), 144C(1), 68, 149, 153
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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SMT BEENA PILLAI, JM &
(Assessment Year: 2015-16) Integrated Core Strategies (Asia) DCIT (IT) Circle-2(2)(1), Room No. 1722, 17th Floor, Pte. Ltd., C/o Sachin P Mulgaokar & Co., Air India Building, Nariman Point, 6/26, Tardeo A.C. Market, Vs. Mumbai-400021. Tardeo Road, Tulsi Wadi, S.O. Mumbai, Maharashtra-400034. PAN : AACCI4678K Appellant) : Respondent) : Ms. Chandni Shah/Shri Dhanesh Appellant /Assessee by Bafna/Hardik Nirmal/Amol Mahajan, AR Revenue / Respondent by : Shri Krishna Kumar, Sr. DR Date of Hearing : 08.01.2025 Date of Pronouncement : 14.01.2025 O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the final order of assessment passed under section 147 r.w.s 144C(13) of the Income Tax Act, 1961 (the Act) by the Dy. Commissioner of Income Tax (International Tax) Circle-2(2)(1), (in short "the AO" dated 11.03.2024 for Assessment Year (AY) 2015-16. The assessee raised various grounds contending the reassessment both on legal grounds as well as on merits. During the course of hearing, the ld. AR present the arguments with regard to Ground No.2 wherein the assessee has challenged the validity of reassessment proceedings for the reason that notice under section 148 of the Act dated 28.07.2022 is barred by limitation.
The assessee is a company incorporated in Singapore and is registered as Foreign Portfolio Investor (FTI) under Securities and Exchange Board of India (SEBI). Assessee is primarily engaged investing in securities including equity shares, debt security and derivatives, etc. For the AY 2015-16 the assessee filed a return of income on 30.09.2015. During the year under consideration, the assessee has earned a Capital Gain of Rs. 182,03,08,129/- which was claimed as exempt under section 90 of the Act r.w. Article 13(4) of the India-Singapore DTAA. The assessee's return was selected for scrutiny and the assessment under section 143(3) was completed accepting the income returned by the assessee. Based on the information received from DDIT(Inv.), Mumbai that assessee is one of the beneficiaries who actively traded in the scrip M/s Tilak Ventures Ltd. which is alleged to be bogus transaction, the assessee's case was reopened by issue of notice dated 30.06.2021 under section 148 of the Act. The AO completed the assessment under section 143(3) r.w.s. 147 of the Act vide order dated 14.03.2022 accepting the income returned by the assessee. Subsequently, as per the directions of the Hon'ble Supreme Court in the case of Union of India v. Ashish Agrawal & Ors., [2022 SCC On Line SC 543] the notice was converted as notice issued under section 148A of the Act. Subsequently, the AO passed an order under section 148A(d) of the Act on 28.07.2022 and a notice under section 148 was issued on the same date. The AO passed the draft assessment order under section 147 r.w.s. 144C(1) on 19.05.2023 wherein he has made an addition of Rs. 1,42,30,227/- under section 68 treating the sale consideration of the scrip M/s Tilak Ventures Ltd. as bogus. The assessee filed its objections before the DRP who confirmed the addition made by the AO. The assessee is in appeal against the final order of assessment passed by the AO as per the directions of the DRP.
The ld. AR submitted that the notice dated 28.07.2022 issued under section 148 of the Act is barred by limitation since the same was issued after the expiry of the time limit of 6 years from the end of the AY as per the provisions of section 149 of the Act under the new regime. The ld. AR submitted that the time limit for issue of notice under section 148 of the Act for AY 2015-16 expires on 31.03.2022 and therefore, the notice issued in assessee's case on 28.07.2022 is beyond time limit specified under the Act. Accordingly, the ld. AR submitted that the consequent reassessment proceedings would be rendered void and liable to be quashed. The ld. AR placed reliance on the decision of the Hon'ble Supreme Court in the case of Rajeev Bansal [2024 SCC OnLine SC 2693] to submit that the test for checking the validity of notices issued under section 148 under new regime for AY 2020-21 or prior years is whether the period of 6 years has expired at the time of issue of such notice and in that case the notice under section 148 become invalid. The ld. AR thus submitted that in the light of the observations of the Hon'ble Supreme Court the period of 6 years for AY 2015-16 expired on 31.03.2022 and therefore the notice dated 28.07.2022 is invalid and barred by limitation. The ld. AR further placed reliance on the decision of the Hon'ble Delhi High Court in the case of IBIBO Group Pvt. Ltd. v. ACIT (W.P. 17639/2022 dated 13.12.2024) where it has been held that "1. The instant writ petition assails the reassessment action initiated under Section 148 of the Income Tax Act, 1961 [Act"] for Assessment Year ["AY"] 2015-2016. The petitioner has impugned the order referable to Section 148A(d) of the Act dated 23 July 2022 and the consequential notice under Section 148 of the Act which came to be issued on the same date. 2. We bear in mind the following concession which came to be recorded on behalf of the respondent before the Supreme Court in Union of India and Others vs. Rajeev Bansal [2024 SCC OnLine SC 2693] and relevant parts whereof are reproduced hereinbelow:-
"(e) The Finance Act, 2021 ((2021) 432 ITR (Stat) 52) substituted the old regime for reassessment with a new regime. The first proviso to section 149 does not expressly bar the application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 Section 3 of the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 applies to the entire Income-tax Act, including sections 149 and 151 of the new regime. Once the first proviso to section 149(1)(b) is read with Taxation and other Lows (Relaxation and Amendment of Certain Provisions) Act, 2020, then all the notices issued between April 1, 2021 and June 30, 2021 pertaining to the assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 will be within the period of limitation as explained in the tabulation below:
(f) The Revenue concedes that for the assessment year 2015-16, all notices issued on or after April 1, 2021 will have to be dropped as they will not fall for completion during the period prescribed under the Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.”
3. In view of the aforesaid, it is evident that the impugned reassessment action for AY 201 would not sustain.”
The ld. AR also drew our attention to various decisions of Co-ordinate Bench whereas similar view has been held.
The ld. DR on the other hand relied on the order of the AO and the directions of the DRP.
We heard the parties and perused the material on record. In assessee's case, the AO issued the original notice under section 148 dated 30.06.2021 for AY 2015-16 and consequent to the directions given by the Hon'ble Supreme Court in the case of Ashish Agrawal (supra), the said notice was deemed as notice issued under section 148A(b). The AO after passing the order under section 148A(d) issued the notice under section 148 dated 28.07.2022. The contention of the assessee is that the said notice is barred by limitation as per the first proviso to the un-amended provisions of section 149(1) as has been confirmed by the decision of the Hon'ble Supreme Court in the case of Rajeev Bansal (Supra). The relevant observations of the Hon'ble Supreme Court reads as under –
Mr N Venkataraman, learned Additional Solicitor General of India, made the following submissions on behalf of the Revenue: (a) to (e)**** (f). The Revenue concedes that for the assessment year 2015-16, all notices issued on or after 1 April 2021 will have to be dropped as they will not fall for completion during the period prescribed under TOLA; ****** 46. The ingredients of the proviso could be broken down for analysis as follows: (i) no notice under section 148 of the new regime can be issued at any time for an assessment year beginning on or before 1 April 2021; (ii) if it is barred at the time when the notice is sought to be issued because of the "time limits specified under the provisions of" 149(1)(b) of the old regime. Thus, a notice could be issued under section 148 of the new regime for assessment year 2021-2022 and before only if the time limit for issuance of such notice continued to exist under section 149(1)(b) of the old regime. 49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, for the assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012- 2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section 149(1)(b) to protect the interests of the assesses.
A combined reading of the above observations of the Hon'ble Supreme Court and the findings of Hon'ble Delhi High Court makes it clear that the test for checking the validity of notices issued under section 148 under new regime for AYs 2021-22 or prior years is whether the period of six years has expired at the time of issue of such notice and in that case the notice under section 148 becomes invalid. These observations also makes it clear that the time limit of ten years as per the amended provisions of section 149(1)(b) can be applied only prospectively. In assessee's case when we apply this test for AY 2015-16, the period of six years has expired on 31.03.2022 and therefore the notice dated 28.07.2022 under section 148 of the Act for AY 2015-16 is invalid since it is barred by limitation. Accordingly the assessment completed under section 147 of the Act is liable to be quashed.
The assessee has also raised Ground No.3 contending that reassessment done under section 147 r.w.s. 144C is done beyond time limit specified under section 153. However, during the course of hearing the ld AR did not press for the said ground and therefore the same is dismissed as not pressed. Since we have quashed the order of re-assessment for AY 2015-16 considering the legal contention raised by the assessee in Ground No.2, the rest of the grounds raised on the merits of the issues have become academic.
In result, appeal of the assessee is partly allowed.